[A Case Study of Nepalese Banking Industry and Foreign Direct Investment: Opportunities and Threat Analysis.]

by

Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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Table of Contents

INTRODUCTIONV

Historical Backgroundv

Research Objectivesvi

Motivation for Foreign Investorsvii

LITERATURE REVIEWX

METHODOLOGYXI

Conceptual Foundationxii

Case Study Researchxii

RESULTSXIII

SWOT Analysisxviii

Strengthsxviii

Weaknessesxix

Threatsxx

Opportunitiesxxiii

Choosing right type of FDI Strategy for Nepalxxv

CONCLUSIONXXVII

Summaryxxvii

Implicationsxxviii

Recommendations and Conclusionxxx

REFERENCESXXXII

A Case Study of Nepalese Banking Industry as well as Foreign Direct Investment: Opportunities as well as Threat Analysis

Introduction

Historical Background

The banking system was inaugurated with the establishment of Nepal Bank Ltd, which was the first bank in Nepal in 1937 (www.nepalnews.com). However, the banking system exist within the country was taken to the private dealer and trading centre. The bank's objectives are to provide services to people whether rich or poor to contribute to national development. After 15 years, Nepal Rastra Bank was established in 1955 which is the central bank of Nepal (www.bgmea.com). The bank was established to monitor, control, and to make rules, regulations, guidelines and policies to supervise the banking system through Nepal (Nepal Bureau of Statistics, 2007, 33).

In 1992, the Government of Nepal introduced the FDI policy, and instituted the "window" system installation, and encourages foreign investment (Nepal Bank Quarterly Report, 2007, 10). As a result of this foreign policy of many investors were attracted especially from South Asia, and began investing in the banking sector of Nepal as a joint venture with local investors (www.nepal-bank.org).

The Nepal Central Bank Limited was the first joint venture bank in the banking history of Nepal was established in 1984, now known as NABIL Bank Ltd. Himalayan Bank Ltd. was founded in 1992 by the distinguished personalities of Nepal, in collaboration with the employees of Central Bank anticipation of a large commercial bank in Nepal (Nepal Bank 2006, 31),. Gradually, many foreign banks were established in the joint venture bank credit as Everest Ltd (Panjab Bank of India), Nepal and Trade Bank Ltd. (NCC Bank) officially registered as Nepal - Bank of Cylon Ltd (Sri Lanka) began operations in 1996 (Nepal Bank 2003, 27),. Currently there are six commercial joint venture foreign banks as a result of financial liberalization policy (Nepal Bank 2002, 25).

Nepal became the 147th member of World Trade Organisation the April 23, 2004. That day, Nepal is committed to allow foreign bank branches in the territory of Nepal to operate the wholesale banking operation on 1 January 2010 (www.gdnet.org).

Research Objectives

The research is trying to find out about the banking sector of Nepal as well as the impact of foreign direct investment in the market for Nepal, taking influence threats and opportunities of January 1, 2010. As a member of the WTO and agreed that foreign ...